Joe,
re: "Suppose Intel has capacity to build 150M processors. Now they will invest in .13u, lower the unit manufacturing costs by 1/3 and double capacity to 300M processors. So now Intel has capacity to build 300M processors, and costs like the old costs to build 200M processors. But suppose they only sell 150M processors. The costs will actually go up by 1/3, not down."
Well, the COGS goes down a lot (also with the 300 mm wafers), but you are right, without growth, the fixed cost as a percentage go up and if unit growth is not there then net profit would probably be down.
Intel is betting on a growing marketplace. If it doesn't happen, Intel (and it's shareholders) are screwed. AMD (and it's shareholders) are screwed also, probably more, becuase the ASP's will drop substantially. And at that point the assumption is that Intel is the low cost producer.
Bottom line, the Intel CC was better news for AMD than Intel. Intel has the communications problem, still declining, they say PC's have bottomed, maybe not servers or mobile. I suppose AMD has more of a flash problem as a percent of sales. We will find out tomorrow night.
John |
